Carbon tax gets unusual support

NEW YORK (CNNMoney) -- Calls for a carbon tax on fossil fuels like gasoline and coal are coming from a surprising quarter these days -- Republicans.

In recent weeks, several prominent Republican thinkers have floated the idea of imposing higher taxes on gasoline, coal and natural gas. The increases, they say, would be offset by tax cuts on paychecks, dividends or corporate taxes.

A carbon tax is considered heresy to many conservatives. The idea is to tax something society wants less of (in this case pollution) and reduce taxes on things it wants more of (in this case work).

"You just change what you tax, not increase the size of the government," said Bob Inglis, a former Republican member of Congress, in a video interview with CNNMoney.

Inglis said his new organization, the Energy and Enterprise Initiative, is studying various ways the tax could be structured.

Previous carbon tax proposals have called for a gasoline tax of an additional $1 a gallon at the pump and a tax on coal or natural gas -- phased in over 10 years or more -- that could push utility bills up significantly in some areas. Most plans call for rebates for lower income people.

The total amount raised by the tax could be substantial. Americans consume over 400 billion gallons of gasoline a year. At a dollar a gallon, that's $400 billion in additional tax revenue from gasoline alone, although conservatives stress it would be offset by cuts elsewhere.

The Energy and Enterprise Initiative, which launched earlier this month, has recently begun pushing the idea, with members making the rounds at college campuses and media outlets.

Talk of a carbon tax came to the fore a few weeks ago when conservative thinkers held a conference around the idea.

While the carbon tax plan is drawing attention now, the idea itself is not new in conservative circles.

For example, a 2007 paper published by the American Enterprise Institute, an influential conservative group, argued that a carbon tax would be preferable to other ways of reducing greenhouse gases such as mandatory emission limits.

One of the authors was Kevin Hassett, now an adviser to presumptive Republican presidential nominee Mitt Romney. A spokesman for Hassett said he was unavailable for comment. A Romney campaign spokeswoman said the candidate does not support such a tax, saying it would push jobs overseas.

But Inglis and others like the idea because it would let cleaner forms of energy compete with dirtier forms without the need for the complicated mandates and tax breaks that currently support renewable energy.

It could also supersede pending greenhouse gas regulations from the Environmental Protection Agency -- something the business community and politicians of all stripes are leery of but which the courts say the agency must carry out.

While no current Republican lawmaker is thought to support the plan, other influential Republicans are on board.

"We have to have a system where all forms of energy bear their full costs," President Reagan's former Secretary of State George Shultz said in a recent interview with Stanford University News. Shultz now heads a task force at Stanford that is currently studying the feasibility of a carbon tax.

For Shultz there are many reasons to support such a tax. One is making fossil fuel energy sources absorb costs that are currently borne out by society at large, such as through higher health insurance premiums or Medicare bills caused by pollution-induced diseases.

He also cites energy independence, as well as global warming, "which is not a matter of opinion, but a matter of fact," he said. "The arctic is melting. A lot of people seem to be scoffing at the idea of global warming, but reality will catch up with them."

No one expects a carbon tax to be passed soon, especially as it generates a huge amount of controversy within the Republican establishment.

Many conservatives fear a carbon tax would not be accompanied by the corresponding tax cuts, turning it instead into just another revenue-raising scheme for the government or to be used for deficit reduction, as some have proposed.

Another significant chunk of the party believes global warming is a sham, and would be loath to support anything that attempts to curb it.

Getting Democrats to agree to a corporate tax cut, or even an easing of EPA regulations in exchange for such a tax, will be a hard sell as well.

But analysts say it's possible a carbon tax will be part of broader negotiations around tax reform that could occur in 2013 or 2014.